China gets US tariff delay but movement on tech unclear

By JOE McDONALD, AP Business Writer&nbsp|&nbsp

Posted: Mon 8:30 AM, Dec 03, 2018&nbsp|&nbsp

Updated: Mon 3:57 PM, Dec 03, 2018

BEIJING (AP) — Buy more U.S. exports? Done. Tinker with technology tactics that irk Washington and other trading partners? Maybe. But scrap those plans, seen by Beijing as a path to prosperity and influence? Probably never.

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The agreement by President Donald Trump and his Chinese counterpart Xi Jinping on a cease fire on tariffs postpones the threat of more disruption for China's exporters and their Asian suppliers. Some economists said Xi might be ready to negotiate in earnest.

Still, Beijing gave no sign of a changed stance on technology ambitions that Washington says violate Chinese market-opening obligations and might threaten U.S. industrial leadership.

Trump's complaints strike at the heart of the ruling Communist Party's state-led economic model and plans to restore China to its rightful place as a political and culture leader by creating global champions in robotics and other fields.

"It's impossible for China to cancel its industry policies or major industry and technology development plans," said economist Cui Fan of the University of International Business and Economics in Beijing.

At his weekend meeting with Xi in Argentina, Trump agreed to postpone planned U.S. tariff hikes on Chinese imports by 90 days while the two sides negotiate. The 90-day clock starts January 1. Xi revived promises to narrow China's multibillion-dollar trade surplus with the United States by purchasing more American exports.

The outcome was "as good as we could have expected," the chairman of the American Chamber of Commerce in China, William Zarit, said in a statement.

Also late Sunday, Trump said on Twitter that Beijing agreed to cut import duties on U.S. autos. There was no Chinese confirmation of the move, which would have little impact on trade because most American vehicles sold in China are made here.

Treasury Secretary Steven Mnuchin told reporters at the White House Monday that there was an "an immediate focus on reducing auto tariffs," though he did not provide details or timing. Asked if there was a specific agreement to remove the tariffs, he said: "Yes, there was."

Yet Larry Kudlow, the top White House economic adviser, later Monday said that "We don't yet have a specific agreement on that," referring to the auto tariffs.

"But I will just tell you as an involved participant we expect those tariffs to go to zero," Kudlow added in a conference call with reporters.

Mnuchin stressed that the two leaders had detailed conversations on 142 items and said the goal now was to turn the talks into a "real agreement." He said both leaders had extended invitations to visit their respective countries and said he expects them to meet in the "near future."

Investors were pleased by the news. The Dow Jones industrial average surged 320 points in later afternoon trading.

Trump's promise gives Xi political room to negotiate after Beijing said earlier talks were impossible while Washington "holds a knife" of tariff threats to China's throat. But both leaders face a mix of economic nationalists, free trade advocates and other conflicting forces at home.

The outcome wasn't the result of a "significant change" by China, Louis Kuijs of Oxford Economics said in a report. Washington instead chose to see Beijing's argument that it already is making changes "in a more positive light."

One sign of how far apart the two sides are: China's foreign minister announced in Buenos Aires that Trump agreed to stop raising tariffs, rather than that he promised a 90-day suspension. Wang Yi failed to mention industrial policy or Trump's demand that Beijing make progress toward changing it or face renewed increases.

Those omissions suggest Beijing doesn't recognize how important those demands are to Trump, said Nick Marro of the Economist Intelligence Unit.

"As a result we expect trade hostilities to resume in 2019," Marro said in a report.

Trump imposed a tariff hike of 25 percent on $50 billion of Chinese imports in July over complaints Beijing steals or pressures companies to hand over technology. Trump hit an additional $200 billion of Chinese goods with a 10 percent tariff that had been due to rise to 25 percent on Jan. 1.

China retaliated by raising its own charges on U.S. imports.

Beijing has tried without success to recruit France, Germany, Japan and other government as allies against Trump. They dislike the American president's tactics but echo U.S. complaints about market barriers.

Xi's government has offered to alter details but rejects pressure to discard blueprints such as "Made in China 2025," which calls for creation of champions in artificial intelligence, electric cars and other industries.

Those are "central to Xi's core agenda of making China an innovation superpower" and linked to "geopolitical competition" with Washington, said Michael Hirson, Jeffrey Wright and Paul Triolo of Eurasia Group in a report.

Still, Kuijs said Chinese leaders might have hinted to the Americans of possible concessions.

China has its own grievances. Beijing is unhappy with U.S. limits on exports of "dual use" technology with possible military applications. Xi's government complains Chinese companies are treated unfairly in American security reviews of proposed corporate acquisitions, even though nearly all deals are approved unchanged.

"China hopes the United States will treat Chinese companies equally," said Song Lifan, an economist at Renmin University in Beijing.

Cui put the odds of an agreement at "higher than 50 percent" but said he had no idea how long that might take.

The tariffs battle has overshadowed changes Xi's government has announced this year.

While Beijing retaliated for U.S. tariff hikes by imposing penalty charges on American soybeans, autos and other goods, it cut duties on factory machinery and other imports from other countries.

The government also has promised to ease limits on foreign ownership of automakers, insurance ventures and other companies.

Business groups have welcomed those changes but say they don't address more important complaints about a thicket of rules limiting access to China's finance, logistics and other industries.

Companies want a genuine response with measurable goals, said Kenneth Jarrett, the president of the American Chamber of Commerce in Shanghai, in an email.

A measure of progress will be whether Beijing offers "meaningful concessions" on technology, said Hirson, Wright and Triolo of Eurasia Group.

Without that, hardliners in Washington "will urge Trump to resume escalation," they said.

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